Optional Theme 1:MEASURING GLOBAL INTERACTIONS

GLOBALISATION for IB1 2013

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Definitions of Globalization

Globalization: The International Monetary Fund (IMF)

defines globalization as:“the growing interdependence of countries worldwide through the increasing volume and variety of cross-border transactions in

goods and services and of international capital flows, and through more rapid and

widespread diffusion of technology”

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The Geographer’s definition According to Peter Haggett globalization is

“the process by which events, activities and decisions in one part of the world can have significant consequences for communities in

distant parts of the globe”.

Today, Globalization has come to be associated with:

“the spread of economic, social and cultural ideas across the world, and the growing uniformity between different

places that results from this spread”.

The consequences of globalisation is a dilution of economic, social and cultural differences between places.

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Glocalization It is a term that was invented to emphasize

that the globalisation of a product is more likely to succeed when the product or service is adapted specifically to each locality or culture it is marketed in.

-presence of McDonald’s restaurant everywhere on the globe = globalisation

- the changing menus of the restaurant to appeal to the local tastes = glocalisation

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Someone’s view of globalization Your car is Japanese. Your pizza is Italian. Your beer is German. Your wine is Spanish. Your democracy is Greek. Your chocolate is Ghanaian. Your coffee is Brazilian. Your tea is Chinese. Your watch is Swiss. Your fashion is French. Your shirt is Indian. Your shoes are Thai. Your radio is Korean. Your vodka is ...Russian. And then complain: your neighbour is an immigrant? Pull yourself together!

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Globalization Index1. AT KEARNEY: AT Kearney is a management consultancy firm that

advises large corporations on international competitiveness.

Founded in 1926 in the US (Chicago). Publishes its index in the Foreign Policy Magazine. It assess the extent to which the world’s most populous

nations are becoming more or less globalised. The AT Kearney Foreign Policy index measures twelve

variables, which are subdivided into four “baskets” of global integration: Economic integration, personal contact, technological connectivity and political engagement.

72 countries ranked in the 2007 globalisation index accounts for 97% of the world’s GDP and 88% of the world’s population.

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Economic integration: Combines data on international trade and foreign direct investment (FDI) inflows and

outflows, international travel and Tourism

Technological connectivity: Counts the number of internet users internet hosts, and secure servers

Political engagements Includes each country’s membership in a variety of

representative international organizations e.g foreign aid, treaties, organizations, and peacekeeping operations

Personal contacts International telephone calls cross-border remittances Travel

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The data obtained for a given variable are calibrated through a process that assigns the value of 1 to the highest data with the all other points valued as fractions of 1.

The base year is assigned a value of 100. The given variable’s scale factor for each subsequent year is the percentage growth or decline in the GDP – or population-weighted score of the highest data point, relative to 100.

Globalization index scores for every country and year are derived by summing all the indicator scores.

Singapore is the most globalised according to this measure. This is followed by Switzerland and the USA in the third position.

Check the internet for graph showing first 20countries

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The Globalization Index 2007 – Top 20 countries

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McThailand

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Mc Japan

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Mc Russia

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McDonalds in Saudi Arabia

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McDonalds in China

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2. The KOF Index of Globalization The KOF Index of Globalization was

introduced in 2002 (Dreher, 2006) KOF is a Swiss Institute of Business Cycle

Research. The overall index covers the economic, social

and political dimensions of globalization. It defines globalization to be the

“process of creating networks of connections among actors at multi-continental distances, mediated through a variety of flows including people, information and ideas, capital and goods”.

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KOF conceptualized Globalization as “a process that erodes national boundaries, integrates national economies, cultures, technologies and governance and produces complex relations of mutual interdependence”.

More specifically, the three dimensions of the KOF index are defined as: Economic, Social and Political.

Economic globalization, characterized as long distance flows of goods, capital and services as well as information and perceptions that accompany market exchanges;

Political globalization, characterized by a diffusion of government policies; and

Social globalization, expressed as the spread of ideas, information, images and people.

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Economic Globalization Broadly speaking, economic globalization

has two dimensions. First, actual economic flows are usually taken to be measures of globalization.

Actual Flows: The sub-index on actual economic flows includes data on trade, FDI and portfolio investment.

Restrictions: The second index refers to restrictions on trade and capital using hidden import barriers, mean tariff rates, taxes on international trade (as a share of current revenue) and an index of capital controls.

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Social GlobalizationThe KOF index classifies social globalization in three categories.

Personal Contacts: This index is meant to capture direct interaction among people living in different countries.

Information flows: It includes the number of internet users, (per 1000 people), the share of households with a television set, and international newspapers traded (in percent of GDP).

Cultural Proximity: Cultural proximity is arguably the dimension of globalization most difficult to grasp. Dreher (2006) suggests the number of English songs in national hit lists or movies shown in national cinemas that originated in Hollywood, number of McDonald's Restaurants, number of Ikea shops, etc.

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Political Globalization

It measures the: number of embassies and high

commissions in a country number of international organizations to

which the country is a member number of UN Security Council peace

missions a country participated in International Treaties

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Method of Calculation -1 To construct its globalization index KOF

transforms each variable into an index using a scale of 1 to 100, where 100 is the maximum value for a specific variable over the period 1970 to 2006 and 1is the minimum value.

Higher values indicate greater degree of globalization.

The data is transformed according to the percentiles of the original distribution.

The weights for calculating the sub-indices are determined using principal components analysis for the entire sample of countries and years.

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Method of Calculation -2 The analysis partitions the variance of the

variables used in each sub-group. The weights are then determined in a way

that maximizes the variation of the resulting principal component, so that the indices capture the variation as fully as possible.

The same procedure is applied to the sub-indices in order to derive the overall index of globalization.

The KOF index shows that globalization has been taken place since the 1970s.

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According to the index, Belgium is the most globalised nation in the world, followed by Austria, Sweden and the Netherlands.

The least globalised country is Burundi, Burma and Central African Republic.

However, countries like Saudi Arabia, North Korea, Somalia and other Islamic states were left out in the analysis by KOF. Why? Due to lack of data.

Examples of KOF’s index of Globalization.

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WORLD SYSTEM ANALYSIS World systems approach is identified with

Immanuel Wallerstein (1974). It is a way of looking at economic, social and

political dev’t. The world systems analysis sees the world as

a single unit and any analysis of dev’t must be seen from a capitalist world economy.

Wallerstein argued that any analysis which looked at individual countries was too simplistic and suffered from developmentalism.

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According to Wallerstein, the capitalist world system has three main characteristics: A global market Many countries, which allow political and

economic competition Three tier countries

The tiers are identified as Core (mostly MEDCs) Periphery (mostly LEDCs) Semi-periphery (countries with class struggle

and social change e.g Latin America in the 1980s and Eastern Europe in the late 80s and 1990s)

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The Theory of Core and Periphery

The basic principle of the 'Core-Periphery' theory is that:

as general prosperity grows worldwide, the majority of that growth is enjoyed by a 'core' region of wealthy countries despite being severely outnumbered in population by those in a 'periphery' that are ignored.

The disparity of wealth between core and periphery countries is staggering, with 15% of the global population enjoying 75% of the world's annual income.

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The Core The 'core' consists of Europe (excluding

Russia, Ukraine, and Belarus) , the United States, Canada, Australia, New Zealand, Japan, South Korea, and Israel.

Within this region is where most of the

positive characteristics of globalization typically occur: transnational links, modern development (i.e. higher wages, access to healthcare, adequate food/water/shelter), scientific innovation, and increasing economic prosperity.

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These countries also tend to be highly industrialized and have a rapidly-growing service (tertiary) sector.

The top twenty countries ranked by the United Nations Human Development Index are all in the core.

The opportunities created by these advantages perpetuate a world driven by individuals in the core.

People in positions of power and influence around the world are often brought up or educated in the core (nearly 90% of world "leaders" have a degree from a Western University).

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Periphery The 'periphery' consists of the countries in the

rest of the world: Africa, South America, Asia (excluding Japan and South Korea), and Russia.

Although some parts of this area exhibit positive development (especially Pacific Rim locations in China), it is generally characterized by extreme poverty and a low standard of living.

Health care is non-existent in many places, there is less access to potable water than in the industrialized core, and poor infrastructure endangers slum conditions.

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Population is skyrocketing in the periphery. Many people living in rural areas perceive

opportunities in cities and take action to migrate there, even though there are not enough jobs or housing to support them.

The majority of population growth around the world is occurring in the periphery.

The rural-to-urban migration and high birth rates of the periphery are creating both megacities, (urban areas with over 8 million people), and (hyper cities, urban areas with over 20 million people).

These cities, such as Mexico City or Manila, have little infrastructure and feature rampant crime, massive unemployment, and a huge informal sector.

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The Semi-Periphery Between the two extremes lie the semi-

peripheries. These areas represented either core regions in

decline or peripheries attempting to improve their relative position in the world economic system.

Good examples of declining cores that became semi-peripheries include Portugal and Spain. Other semi-peripheries at this time were Italy, southern Germany, and southern France.

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Economically, these regions retained limited but declining access to international banking and the production of high-cost high-quality manufactured goods.

Unlike the core, however, they failed to predominate in international trade and thus did not benefit to the same extent as the core.

According to Wallerstein, the semi-peripheries were exploited by the core.

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Theories of Globalization1. The World Economy Theory

(Hyperglobalisationism) Hyperglobalists define globalization as the

process by which the capitalist world-system spreads across the entire globe.

They argue that the global market place is becoming so advanced and integrated that the nation-state is becoming obsolete.

They are of the view that the market is more rational than governments

On the other hand they think that corporate power is less compassionate than governments, who are usually accountable to the people who voted them to power

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With the operation of capitalist market in many parts of the world, hyperglobalist argue that globalisation has reached its geographical limit in the 1990s.

They are of the view that the world economy is now a single world market and a single labor force.

Countries in the core the world economy are MEDC who concentrate on highly skilled labor force, operate capital intensive methods of production, have a strong army and consume much of the profits of the world

The periphery countries focus on low skilled workers, operate on labour intensive methods, producers of raw materials for MEDCs with a weaker army.

There are semi-peripheral areas which are less dependent on the core than the periphery. They have a stronger military force and a more diversified economy.

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2. The Regional Bloc Theory (Global Scepticism)

Global Sceptics disagree with the hyperglobalists view. The theory suggest that globalization is the result of

growing regional blocs, e.g ECOWAS, NAFTA, EU etc. It views globalization as a strategy extend capitalism

to other parts of the world, which sometimes results in violent protests.

It suggests that there is no gov’t interference in the globalization process.

They are of the view that the root cause of globalization is the unquestioning nature of the subject.

That capitalism not compassionate and therefore not friendly to the poor; it however stresses on competition and financial efficiency.

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3. The Third Way Theory (or Transformationalism)

It examines the link between economic processes globally.

It looks for ways of transforming the powers of the nation-state to cope with the pressures of globalisation.

It challenges existing institutions to transform or restructure.

It is linked to a political agenda in the EU called the ‘the third way’.

It is summarized in the saying “Think globally, Act locally”.

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4. World-Culture Theory It sees globalization in terms of the increasing

uniformity or homogenization of cultures around the world.

This theory will be discussed later in detail in IB2.

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Blank outline world map

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Mapping Global Core – Internet Map

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Areas without internet coverage